Govt completes draft tax laws

Govt completes draft tax laws

Rendi A. Witular, The Jakarta Post, Jakarta

Realizing that the country's tax regime has long discouraged investors, the government is moving to improve the country's tax laws by addressing taxpayers' concerns over uncertainties in collection and rebates.

The Ministry of Finance's Directorate General of Taxation has completed the revision of the country's tax laws, the third major tax reform, which includes Law No. 16/2000 on general taxation arrangements and procedures.

I Made Gde Erata, head of the tax law revision team, said the biggest breakthrough in the draft revision was the introduction of a time limit for tax procedures and a selective audits of taxpayers. The establishment of a special commission to supervise tax officials and gather complaints from taxpayers, was also important, he said.

"What the business community really wants to see is more on tax administrative reform to improve certainty in tax law enforcement by providing time limits for any tax procedures," Erata told The Jakarta Post recently.

He said the draft laws, which were part of the government's key economic reform measures, were primarily aimed at attracting foreign investments in order to drive higher economic growth.

According to the draft law on general taxation arrangements made available to the Post, taxpayers categorized by the directorate as "good" corporate or private citizens should be able to claim refunds for income tax within three months, and for value-added tax (VAT) in just one month without needing any audits to clarify the amounts.

For other taxpayers, the period for claiming refunds would remain the same -- 12 months.

Deciding who would go into the category of "good" taxpayers will be determined later by the ministry.

The draft law also stipulates that if the tax directorate fails to issue the claimed refunds within the given period, it must pay 2 percent interest a month on the unpaid funds.

The directorate will also be required to acknowledge any objections from taxpayers if it fails to settle their claims by the deadline and sanction officials who fail to complete their jobs on time.

At present, taxpayers remain at the mercy of tax auditors when trying to claim rebates as there is no prescribed time limit, encouraging taxpayers to bribe the tax officials to get refunds sooner.

However, under the draft law, taxpayers can file a complaint to the Ministry of Finance's Inspectorate General if they are extorted by the tax officials and report to it any corruption within the tax office.

The directorate has also finished drafting the revision to Law No. 17/2000 on income tax and Law No. 18/2000 on VAT on goods and services and luxury sales tax.

The revision package was submitted to President Susilo Bambang Yudhoyono on Tuesday by the State Secretary, with the government scheduled to submit it to the House of Representatives for deliberation next month.